BILL ANALYSIS Ó SB 471 Page 1 Date of Hearing: July 13, 2015 ASSEMBLY COMMITTEE ON NATURAL RESOURCES Das Williams, Chair SB 471 (Pavley) - As Amended June 2, 2015 SENATE VOTE: Not relevant SUBJECT: Water, energy, and reduction of greenhouse gas emissions: planning. SUMMARY: This bill specifies that reductions of greenhouse gas (GHG) emissions associated with the water sector, including water use, supply, and treatment, are eligible investments from the Greenhouse Gas Reduction Fund (GGRF). Requires the California Energy Commission (CEC) to study water-related energy use in California. Requires the State Water Resources Control Board (SWRCB) to develop a grant and loan program to fund projects that result in water-related GHG emission reductions. EXISTING LAW, under the California Global Warming Solutions Act of 2006 (AB 32): 1)Requires the California Air Resources Board (ARB) to adopt GHG emissions reduction measures to achieve a reduction in statewide GHG emsisions to the 1990 level. 2)Requires ARB to prepare and approve a Scoping Plan, on or SB 471 Page 2 before January 1, 2009 and once every five years thereafter, for achieving the maximum technologically feasible and cost-effective reductions in GHG emissions from sources of emissions by 2020. 3)Establishes the GGRF in the State Treasury; requires all funds, except for fines and penalties, collected pursuant to a market-based mechanism be deposited in the GGRF; and, requires the Department of Finance, in consultation with ARB and any other relevant state agency, to develop a three-year investment plan for the GGRF. 4)Requires that the GGRF be used to facilitate GHG emissions reductions in this state consistent with AB 32. Requires that annual budget appropriations from the GGRF be consistent with the investment plan. THIS BILL: 1)States legislative intent relating to the nexus between water, energy, and GHG emission reductions. 2)Specifies that reductions of GHG emissions associated with the water sector, including water use, supply, and treatment, are eligible investments from the GGRF. 3)Requires CEC, in cooperation with the State Water Resources Control Board (SWRCB), ARB, the Public Utilities Commission (PUC), and the Department of Water Resources (DWR), to conduct a study of water-related energy use in the state. In conducting the study, requires CEC to: SB 471 Page 3 a) Hold a minimum of two public workshops to allow input from stakeholders; b) Include any source-specific data; and, c) Identify existing data gaps. 4)Requires SWRCB, in cooperation with CEC, ARB, PUC, and DWR, to establish a grant and loan program for water projects that result in the net reduction of water-related GHG emissions. 5)Establishes the following categories for grant funding: a) Precision irrigation; b) Infrastructure improvements that will help deliver on-demand water for precision application; c) Local water solutions that reduce net energy use; d) Clean energy generation in the water sector; e) Leak detection; f) Water appliance efficiency; and, g) Water monitoring software. 6)Requires that any public funds made available for the program to private water companies regulated by the PUC be used for the benefit of ratepayers or the public. 7)Authorizes SWRCB to adopt guidelines and regulations necessary to implement the bill. FISCAL EFFECT: Unknown COMMENTS: SB 471 Page 4 1)Author's statement. Some of [the state's] water-energy related climate pollution is already covered by the state's cap-and-trade program by the electricity generation sector. However, water suppliers, treaters, distributors, and end users currently lack the information and opportunity to do their part in advancing our climate and water conservation goals. As a result, a variety of projects that might reduce climate pollution from the water system do not currently qualify for project funding from the GGRF. SB 471 will establish a program to allow a variety of water projects to qualify for funding from the GGRF, provided these projects reduce emissions in furtherance of our state climate goals. 2)Water and energy use. According to the CEC, water-related energy use in California consumes approximately 20% of the state's electricity and 30% of the state's non-power plant natural gas (natural gas not used to produce electricity). The water sector uses electricity to pump, treat, transport, deliver, and heat water. The CEC also found that the most energy-intensive uses of water in California are associated with end uses by the customer (e.g., heating, processing, and pressurizing water), and 75% of the electricity and nearly all of the natural gas use related to water in California is associated with water heating. Additionally, expected increases in groundwater pumping, water treatment, and water recycling, due to drought conditions in the state, mean the energy intensity of water will likely increase. 3)Executive Order. Executive Order B-29-15 (Brown), issued SB 471 Page 5 April 1, 2015, directed state agencies to perform various actions regarding saving water to respond to severe drought conditions in the state, including directing the CEC, jointly with DWR, to implement a Water Energy Technology program to deploy innovative water management technologies that achieve water and energy savings and GHG emissions reductions. The Executive Order also directed the CEC, jointly with DWR, to implement a limited statewide appliance rebate program for inefficient appliances. 4)Funding for water and GHG emissions. Emergency drought relief legislation, SB 103 (Budget Committee, Chapter 2, Statutes of 2014) appropriated $10 million to the California Department of Food and Agriculture (CDFA) for water and energy efficiency projects in the agricultural sector, and $30 million to DWR to implement a grant program to support local water-use efficiency projects and energy efficiency projects at State Water Project facilities. The 2014-15 Budget allocates $832 million in GGRF revenues to a variety of transportation, energy, and resources programs aimed at reducing GHG emissions. Various agencies are in the process of implementing this funding. The budget agreement specifies how the state will allocate most cap-and-trade auction revenues in 2015-16 and beyond. For all future revenues, the legislation appropriates 25% for the state's high-speed rail project, 20% for affordable housing and sustainable communities grants, 10% to intercity capital rail projects, and 5% for low-carbon transit operations. The remaining 40% is available for annual appropriation by the Legislature. Of that 40% available for annual appropriation, the Governor's proposed 2015-16 cap-and-trade expenditures would appropriate $60 million to DWR and CDFA for water and energy efficiency projects, $30 million to CEC and DWR for rebates to replace SB 471 Page 6 inefficient appliances, and $30 million to CEC and DWR for the Water and Energy Technology Program, as described in the Executive Order. 5)Drought funding. In response to California's ongoing drought, AB 91 (Budget and Fiscal Review), Chapter 1, Statutes of 2015 allocated just over $1 billion for drought-related activities. Among other things, this bill: a) Accelerates a $131.7 million appropriation to SWRCB to fund water recycling projects, including feasibility studies, demonstration projects, and larger scale water recycling projects. b) Accelerates a $135.5 million appropriation to SWRCB to improve access to drinking water for disadvantaged communities and help small communities pay for wastewater treatment. c) Accelerates a $20 million appropriation from the GGRF to DWR for state and local water use efficiency programs that reduce GHG emissions. d) Appropriates $10 million from the GGRF to CDFA for agricultural water efficiency projects that reduce GHG emissions. 6)Suggested amendments. The author's office intends for the grant and loan program to be funded by the GGRF; however, the bill does not specify a funding source or appropriate any funds. The committee may wish to amend the bill to specify that the program shall be funded upon appropriation by the Legislature from the GGRF. SB 471 Page 7 For clarity, the committee may wish to amend the bill to clarify that grants and loans are available for in-state projects. REGISTERED SUPPORT / OPPOSITION: Support California Association of Sanitation Agencies California Coastkeeper Alliance California League of Conservation Voters California Municipal Utilities Association City of Agoura Hills, Mayor Weber City of Pasadena's Water and Power Department Clean Water Action Coastal Environment Rights Foundation East Bay Municipal Utility District SB 471 Page 8 Humboldt Baykeeper Inland Empire Waterkeeper Klamath Riverkeeper LA River Revitalization Corporation Las Virgenes Municipal Water District Los Angeles Waterkeeper Mono Lake Committee Monterey Coastkeeper Orange County Coastkeeper Russian Riverkeeper San Diego Coastkeeper San Francisco Baykeeper San Luis Obispo Coastkeeper SB 471 Page 9 Santa Barbara Channelkeeper Sonoma County Water Agency Southern California Edison The Climate Registry The Energy Coalition The River Project TreePeople Union of Concerned Scientists USGBC U.S. Green Building Council Union of Concerned Scientists Ventura Coastkeeper SB 471 Page 10 Opposition None on file Analysis Prepared by:Elizabeth MacMillan / NAT. RES. / (916) 319-2092